FILE PHOTO: A street sign, Wall Street, is seen in front of the New York Stock Exchange (NYSE) in New York City, New York, the United States, January 3, 2019. REUTERS / Shannon Stapleton / File Photo
October 30, 2020
By Rahul Karunakar and Tushar Goenka
BENGALURU (Reuters) – Global fund managers recommended lowest equity exposure and highest bond exposure in portfolios in over a decade this month. They pointed to the risks of the US election and the economic fears sparked by a resurgent coronavirus pandemic. This was the result of a survey by Reuters.
Preparations for the November 3rd presidential election, new national bans in Europe’s largest economies, and daily record US coronavirus infections sparked the worst global share sale in months. Almost $ 2 trillion in value was wiped out on Wednesday alone.
Since the beginning of the pandemic, fund managers with assets under management of over $ 4 trillion, which Reuters regularly surveys, have identified the current second wave of infections as the main risk and have remained cautious throughout the year.
In line with this strategy, the October 15-29 survey of 33 asset managers and chief investment officers in Japan, continental Europe, the United Kingdom and the United States found that recommended bond holdings rose more than 5 percentage points since January this year to an average of 45, 5% increased month.
This is an increase of 44.7% in the previous month, the highest value since the start of the comparable survey over a decade ago.
At the same time, total exposure in the global balanced model portfolio continued to decline to an average of 41.4% in October, compared to 42.7% in September, the lowest level since early 2010.
This average has fallen by more than 8 percentage points since the beginning of the year.
“There aren’t many reasons for us to be bullish on stocks. All upcoming events clearly point to more pain for the equity markets, ”said a chief investment officer of a major US fund management company. “There is a high risk of the already fragile economic recovery from the resurgent COVID-19 pandemic,” he said.
“Forget about a V-shaped recovery, the W-shaped scenario for the major world economies has become the consensus in the market.”
This reflects the results of a separate Reuters survey of around 500 economists, in which the new wave of coronavirus cases posed a high risk of halting the current global economic recovery as early as this year. [ECILT/WRAP]
In the latest survey, fund managers re-identified the pandemic as the main risk in response to an additional question.
“Stocks priced in a COVID-19 vaccine later this year. However, if it is significantly delayed, has poor clinical efficacy, or has significant side effects, we could see a significant market correction,” said Benjamin Suess, director of UBS Asset Management in Zurich .
However, more than half of the 21 fund managers who answered a question about the biggest driver for the stock market said that additional fiscal stimulus in the US would be the main driver for the remainder of the year. Many predict a buying opportunity for stocks if that goes away.
“You can see the US election result as a trigger for markets rather than a driver,” said Craig Hoyda, senior quantitative analyst at Aberdeen Standard Investments in Edinburgh. “As soon as the result is certain, the markets – in their role as forward discounting mechanisms – will take the expected path of fiscal policy.”
Still, 18 of 21 fund managers who responded to a question about the potential impact of a late or controversial election result in the US said it would lead to a significant sell-off immediately after the sale.
“Everything is still possible if the result is close. US economic negotiations would become even more difficult if there was an unclear election result and markets back to the chaos that prevailed earlier this year, ”added the US-based global fund manager.
A deep sell-off in March lost a third of the value of US stock indices as the pandemic hit markets and stalled economies.
Now, less than a week before the US presidential election, a revival in COVID-19 cases is bringing new boundaries and unrest in financial markets.
(Reporting and survey by Rahul Karunakar and Tushar Goenka in BENGALURU and Fumika Inoue in TOKYO; editing by Ross Finley and Tomasz Janowski)
This article originally appeared on www.oann.com